Use the Following Information to Answer the Question(s) Below

question 18

Multiple Choice

Use the following information to answer the question(s) below.
Your investment portfolio consists of $10,000 worth of Google stock. Suppose that the risk-free rate is 4%, Google stock has an expected return of 14% and a volatility of 35%, and the market portfolio has an expected return of 10% and a volatility of 18%. Assume that the CAPM assumptions hold.
-The expected return on the alternative investment having the highest possible expected return while having the same volatility as Google is closest to?

• A) 21.6%
• B) 22.5%
• C) 23.4%
• D) 35.0%

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Definitions:

Treasury Bills

Short-term debt securities issued by the government with a maturity of less than one year, used to finance government spending.

Put Option

A financial contract giving the holder the right, but not the obligation, to sell a specified amount of an underlying asset at a predetermined price within a specific time frame.

Market Value

The present cost at which a product or service is available for purchase or sale in the market.

Exercise Price

The specified price at which an option's holder can buy (call option) or sell (put option) the underlying security or commodity.